The Egyptian government is considering the future of industrial property tax exemptions, set to expire at the end of this year. The exemption was initially introduced to support the growth of the industrial sector. According to Ashraf Abdel Ghani, founder of the Egyptian Tax Experts Association, the industry is a key driver of development, providing 3.2 million direct job opportunities and contributing 17.1% to the country's GDP.
The industrial sector is expected to play an even more significant role in Egypt's economy, with plans to increase its contribution to 20% of GDP and create 7 million direct job opportunities by 2030. However, the sector currently faces significant challenges, including rising energy and raw material costs, as well as disruptions to global supply chains. These challenges have been exacerbated by geopolitical tensions and conflicts in the region.
To support the sector, Abdel Ghani suggests that the government reconsider the property tax on factories. Previously, the Ministry of Finance had issued a decision to bear the costs of property tax for 20 industrial activities for three years, ending in 2026. The Egyptian Tax Experts Association has proposed three scenarios for the government to consider, with the most favorable being a permanent exemption from property tax for factories.
A permanent exemption would allow industrialists to direct investments towards operational activities and expansions, rather than being burdened with tax liabilities. However, this would require legislative amendments to the property tax law. The second scenario involves extending the temporary exemption until 2030, in the hope that the current tensions will subside and the industrial sector will recover.
The third scenario, which the association opposes, involves maintaining the current property tax regime for factories after the temporary exemption expires. This would lead to a significant increase in tax liabilities, resulting from the five-year assessment process, and could lead to higher product prices and disruptions to investors' financial structures.
Abdel Ghani emphasizes that the industrial sector is crucial for the country's economic growth, job creation, and export expansion. He argues that factory owners do not benefit directly from increased land values, but rather play a vital role in providing employment opportunities, meeting domestic market needs, reducing imports, and boosting exports.
The Egyptian Tax Experts Association is advocating for a policy that supports the growth and competitiveness of the industrial sector. The association's proposals aim to reduce the tax burden on factories and encourage investment in the sector. The government's decision on the future of industrial property tax will have significant implications for the sector's development and the country's economic growth.
Key points
- The Egyptian government faces three scenarios for industrial property tax, including permanent exemption, extension of the temporary exemption, and maintaining the current tax regime.
- The industrial sector contributes 17.1% to Egypt's GDP and provides 3.2 million direct job opportunities.
- The sector is expected to increase its contribution to 20% of GDP and create 7 million direct job opportunities by 2030.
